Jindal Thermal Power Company vs Deputy Commissioner of Income Tax, Karnataka High Court, IN ITA NO. 3025/2005, 06 August 2026.

The Hon’ble Karnataka High Court held that the amendment to Section 9(1)(vii) of the Income-tax Act, 1961, introduced by the Finance Act, 2010, which removed the requirement that technical services be rendered in India, could not operate retrospectively from 1 June 1976. The Court held that the amendment widened the scope of the charging provision and therefore could not be treated as merely clarificatory so as to impose a retrospective tax liability.

The Court relied on Ishikawajima-Harima Heavy Industries Ltd. v. DIT to hold that, under the law applicable at the relevant time, fees for technical services paid to a non-resident were taxable under Section 9(1)(vii)(c) only where the services were both rendered and utilised in India. The Finance Act, 2010, by providing that taxability would arise whether or not the non-resident had rendered services in India, materially widened the scope of the charging provision and therefore could not be treated as merely clarificatory despite the expression “for removal of doubts”.

The Court further held that the retrospective application of the amendment could not create a fresh tax liability in respect of transactions that were not taxable under the law prevailing at the relevant time. In addition, the Court observed that, even if the amended domestic law were treated as applicable, the more beneficial provisions of the India-USA DTAA would prevail under Section 90(2) of the Income-tax Act, 1961. Accordingly, the Court directed that the Finance Act, 2010 amendment be read as prospectively applicable.

Last Updated on 4 September, 2026